58 questions. Try each one, then open the answer to check yourself and read the explanation.
Which of the following is not a function of commerce?
Answer: B (creation of goods)
Creating goods is production (industry); commerce distributes them.
Any activity that changes raw materials into consumer or industrial goods is
Answer: D (manufacturing)
Changing raw materials into finished goods is manufacturing.
The divisions of production are
Answer: C (industry, commerce and services)
Production is divided into industry, commerce and direct services.
Risks in business are borne by the
Answer: B (entrepreneur)
The entrepreneur bears business risks.
The main aim of credit and thrift societies is to
Answer: D (encourage savings among members)
Thrift and credit societies mainly encourage members to save (and then lend to them).
In which of the following business units are profits shared on the basis of membership patronage?
Answer: C (co-operative society)
Co-operatives share surplus by patronage.
A business becomes a separate legal entity after it has
Answer: B (been incorporated)
Incorporation gives a company separate legal existence.
The amalgamation of firms engaged in cotton processing and the manufacturing of textiles is
Answer: B (vertical integration)
Firms at different stages of producing the same good combine in vertical integration.
A private company's ability to raise capital is limited because
Answer: C (shares cannot be made public)
A private company cannot offer its shares to the public, which limits the capital it can raise.
An increase in the volume of sales is also an increase in
Answer: B (turnover)
Turnover is the volume of sales.
The working capital of a firm is calculated as
Answer: A (current assets minus current liabilities)
Working capital = current assets − current liabilities.
Dividend is always expressed as a percentage of total
Answer: B (value of shares owned)
Dividend is stated as a percentage of the (nominal) value of shares held.
Which of the following is a duty of the Employers Association?
Answer: B (establishing a uniform wage scale)
Employers' associations negotiate uniform wages and conditions with trade unions.
A very effective way of resisting the producer's exploitation is to
Answer: C (form consumers' association)
Consumers' associations protect buyers against exploitation.
Which of the following makes sales possible without a sales attendant?
Answer: C (vending machine)
Vending machines sell without attendants.
Which of the following distinguishes supermarkets from other retail outlets?
Answer: A (use of self-service)
Supermarkets are known for self-service; standard shop fronts belong to chain stores.
Manufacturers sell directly to consumers when they
Answer: D (deal in perishable goods)
Perishable goods must reach consumers quickly, so producers sell direct.
Which of the following is regarded as a document of title in foreign trade?
Answer: B (bill of lading)
The bill of lading is the document of title to goods shipped.
The most acceptable means of payment in foreign transaction is
Answer: C (irrevocable letters of credit)
An irrevocable letter of credit guarantees payment to the exporter.
Which of the following is not a function of the Ports Authority?
Answer: A (controlling pollution in rivers)
Ports authorities provide storage, berths and water-traffic facilities at ports; controlling pollution in rivers generally is not their job.
The aid to trade responsible for the preservation of perishable items is
Answer: A (warehousing)
Warehouses (cold rooms) preserve perishable goods.
Which of the following abbreviations permits the seller to correct any error in an invoice?
Answer: C (E. & O.E)
E & OE lets the seller correct errors later.
C & F as a price quotation in foreign trade means that the buyer
Answer: B (has to pay for cost and freight)
A C & F price includes cost and freight, so the buyer pays cost and freight but arranges insurance himself.
A bill of exchange is made more negotiable if it has been
Answer: B (accepted)
Once the drawee accepts a bill, it becomes a firm promise to pay and is easier to negotiate.
The primary objective of insurance is to
Answer: B (meet uncertainties in future)
Insurance protects against future uncertainties.
Which of the following services is rendered by Central Bank?
Answer: D (issuing currency notes)
Only the central bank issues currency notes; safe keeping for the public is a commercial bank service.
Which of the following gives businessmen the opportunity to buy shares of public limited companies?
Answer: D (the stock exchange)
Shares are bought and sold on the stock exchange.
The liquid assets of commercial banks are
Answer: A (treasury bills, bills of exchange and cash)
A bank's liquid assets are cash and near-cash assets such as treasury bills and bills of exchange.
The insurance policy which covers damages to the body of a ship is
Answer: D (hull insurance)
Hull insurance covers the body of the ship.
Which of the following central bank functions inspires confidence in the banking system in case of emergency?
Answer: B (lender of last resort)
As lender of last resort the central bank rescues banks in a crisis.
Which of the following proves that important documents have reached their destination?
Answer: C (recorded delivery services)
Recorded delivery gives proof of delivery.
The main advantage of sea transport over air transport is
Answer: A (capacity)
Ships carry far larger loads than aircraft.
The mode of transport that conveys goods at low cost per unit is
Answer: B (rail)
Rail carries large loads cheaply per unit over long distances.
Any activity aimed at creating more markets for a product is
Answer: C (promotion)
Promotion (advertising, sales promotion) creates more markets for a product.
Activities aimed at boosting the image of an organization are regarded as
Answer: C (public relations)
Public relations boosts an organisation's image.
When consumers are unaware of the quality of a product, the best advertising technique to use is
Answer: A (informative advertising)
Informative advertising tells consumers about a product's qualities.
Musa entered into a contract to supply two cows to Aro. Before the agreed date of supply and without the knowledge of the two parties, thieves stole the cows. This is an example of termination of contract by
Answer: C (frustration)
An event beyond both parties' control made performance impossible: frustration.
Abuse of monopoly power by industrialists could lead to
Answer: C (nationalization)
Government may nationalise firms that abuse monopoly power.
Which of the following is an objective of indigenization policy? To
Answer: B (encourage local participation in business)
Indigenisation aims to increase citizens' participation in business.
One of the objectives of ECOWAS is to
Answer: C (promote trade within the region)
ECOWAS aims to promote trade among member states.
The amount of insurance premium to be paid depends on the
Answer: B (extent of the possible loss and the frequency of risk)
Premiums depend on how large and how likely the loss is.
Which of the following is the main task of the Marketing Manager whose company has adopted the marketing concept? To
Answer: A (identify and satisfy customers' needs)
The marketing concept puts identifying and satisfying customers' needs first.
The Money Market is the
Answer: B (market for short-term loans)
The money market deals in short-term loans and funds.
The choice of medium used in advertising is not determined by the
Answer: C (nationality of people using the medium)
Cost, audience age and reach matter; nationality of users does not.
If a country wishes to discourage imports, it
Answer: C (imposes tariffs)
Tariffs make imports dearer and so discourage them.
Which of the following sources of capital to a business requires mortgaging a specific asset?
Answer: C (fixed debenture)
A fixed debenture is secured by a charge on a specific asset.
Which of the following interest holders are settled first in case of a company's liquidation?
Answer: B (debenture holders)
Debenture holders are creditors and are paid before any shareholders.
The West African Clearing House (WACH) was established to
Answer: D (promote the use of currencies of all members for inter regional trade.)
The West African Clearing House let member states settle trade payments in their own currencies.
Commerce 2 (essay, answer five questions only)
(a) What is a Capital Market?
(b) State eight reasons why a bank may dishonour a cheque
(a) The capital market is the market for long-term funds, where shares, stocks, bonds and long-term loans are raised and traded; members include the stock exchange, issuing houses, development and mortgage banks, insurance companies.
(b) Any eight: insufficient funds; payment stopped by drawer; post-dated cheque presented early; stale cheque; signature differs from specimen; words and figures differ; alterations not signed; death, insanity or bankruptcy of drawer; account closed or frozen by court order; irregular endorsement; mutilated cheque.
Eight distinct reasons are needed in (b).
Commerce 2 (essay, answer five questions only)
List and explain five problems associated with international trade
Any five, explained: different currencies/exchange rates; language barriers; different laws, customs and weights and measures; long distances and high transport costs; many documents and formalities; trade restrictions (tariffs, quotas); risks of goods in transit; difficulty assessing buyers' creditworthiness; political instability; delays in payment.
Explain each problem briefly.
Commerce 2 (essay, answer five questions only)
Explain the following:
(a) Prospectus
(b) Share certificate;
(c) Underwriting of shares
(d) Ordinary shares;
(e) Dividend warrants
(a) Prospectus – document issued by a public company inviting the public to buy its shares, giving details of the company and the offer.
(b) Share certificate – document issued under the company's seal to a shareholder as evidence of the number of shares he owns.
(c) Underwriting of shares – an issuing house or bank agrees, for a commission, to buy any shares the public does not take up.
(d) Ordinary shares – shares of the owners of the company, carrying votes and variable dividends paid after preference dividends; greatest risk.
(e) Dividend warrant – a cheque-like document sent by the company to a shareholder to pay his dividend.
One or two sentences per term.
Commerce 2 (essay, answer five questions only)
State five effects of hire purchase on each of the following:
(a) buyer
(b) seller
(a) Buyer (any five): enjoys use of goods at once; pays gradually from income; pays more than the cash price; goods can be repossessed on default; not owner until the last instalment; may overspend; can acquire costly goods without large capital.
(b) Seller (any five): increased sales; earns interest; risk of bad debts; capital tied up; can repossess goods on default; cost of collecting instalments; repossessed goods may lose value.
Include both good and bad effects.
Commerce 2 (essay, answer five questions only)
(a) What is the difference between Privatization and Nationalization?
(b) Explain four reasons why a country may choose to privatize state-owned enterprises
(a) Privatisation transfers ownership of government enterprises to private individuals or firms; nationalisation transfers private businesses to government ownership.
(b) Any four, explained: to improve efficiency; to reduce the burden of subsidies on government; to raise revenue from the sale; to reduce political interference and corruption; to attract private and foreign investment; to widen share ownership; to improve service quality.
The two are opposite movements of ownership.
Commerce 2 (essay, answer five questions only)
(a) Adama and Awa have teamed up to form a partnership business. Explain five benefits they are likely to derive.
(b) State five provisions in the Partnership Deed.
(a) Any five, explained: more capital; shared risks and losses; combined skills and experience; division of work; easier to obtain loans; continuity when one partner is absent; better decisions through consultation.
(b) Any five: name and address of the firm; names of partners; nature of the business; capital contributed by each partner; profit/loss-sharing ratio; interest on capital and drawings; salaries of partners; duties of each partner; admission and retirement of partners; how disputes are settled; how the partnership is dissolved; date of commencement and duration.
Benefits come from pooling capital and skills.
Commerce 2 (essay, answer five questions only)
(a) Distinguish between Authorized Capital and Called-up Capital
(b) Use the following information to answer the questions that follow: XYZ Limited is a trading company. The following transactions took place in the month of February:
Purchase of goods – 32 suitcases at ₦3,500 each; 42 shirts at ₦800 each
Additional information:
(i) The cost of transporting goods to the firm's premises was ₦2,500
(ii) Two workers of the firm were paid wages and salaries of ₦4,500 each
(iii) Total sales revenue was ₦180,000
You are required to calculate the:
(a) gross profit
(b) net profit
(a) Authorised capital is the maximum share capital a company may issue, stated in its memorandum; called-up capital is the part of issued capital the company has asked shareholders to pay so far.
(b) Purchases = 32 × 3,500 + 42 × 800 = 112,000 + 33,600 = ₦145,600; add carriage inwards 2,500 = cost of goods sold ₦148,100 (all goods sold).
Gross profit = 180,000 − 148,100 = ₦31,900.
Net profit = 31,900 − wages (2 × 4,500 = 9,000) = ₦22,900.
Carriage on goods bought is added to cost; wages are deducted for net profit.
Commerce 2 (essay, answer five questions only)
(a) Give five reasons why consumers need protection
(b) Explain five means by which consumers can be protected
(a) Any five: sale of fake and sub-standard goods; harmful/expired foods and drugs; exploitative prices and hoarding; false or misleading adverts; short weights and measures; unfair credit/hire purchase terms; ignorance of consumers about their rights; monopoly power of producers.
(b) Any five, explained: legislation (Sale of Goods Act, Hire Purchase Act, Weights and Measures Act, Trade Descriptions Act, Food and Drugs Act); government agencies (standards organisation, NAFDAC, Consumer Protection Council); consumer associations; price control; consumer education; self-regulation by trade associations; the courts.
Name real laws and agencies in (b).
Commerce 2 (essay, answer five questions only)
List and describe five ways by which the post office aids business
Any five, described: carries business letters and parcels; registered and recorded delivery for valuable or important items; express/speed post for urgent mail; business reply service lets firms pay for customers' replies; post office boxes and private bags; franking machines for bulk mail; postal and money orders for payments; poste restante; courier (EMS) services; savings bank services.
Say how each service helps a business.
Commerce 2 (essay, answer five questions only)
State two advantages of using each of the following media of advertising.
(a) Newspaper
(b) Radio
(c) Television
(d) Posters
(e) Direct mail
(a) Newspaper (any two): can be kept for reference; wide circulation; detailed information and pictures; relatively cheap.
(b) Radio (any two): reaches rural and non-literate people; wide coverage; can be in local languages; cheaper than TV.
(c) Television (any two): combines sight and sound; products can be demonstrated; uses colour; strong impact.
(d) Posters (any two): constant reminder; attract attention; cheap; show where products can be obtained.
(e) Direct mail (any two): personal touch; selective – reaches chosen audience; detailed information; cost-effective for small audiences.
Two advantages for each medium.